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Why Do Companies Implement Performance Appraisal Systems?

There are many reasons companies implement performance appraisal systems and many believe the performance appraisal systems are a valuable part of their organizational structure and company culture. Performance reviews are in place for a lot of reasons, including:

Provides a hierarchical management tool.

Ranks employees for proper compensation increases and promotions.

Provides needed feedback to employees.

Standardizes discussion regarding employee performance so it can be seen as “fair.”

Provides a necessary degree of legal protection.

We believe most companies have the performance appraisal process ingrained into their corporate culture and believe it works even in situations where it doesn’t. A lot of management teams like the hierarchical way it allows them to manage the employee evaluation process. It provides a mechanism for rewarding high performers and punishing poor performers.

You can see this play out in organizations where there is constant fear in the process. Many employee appraisal processes are rooted in fear and are used as a tool to keep employees fitting in a certain bracket as to not have problems or issues. This leads to widespread dislike among the staff for the employee review process.

HR departments encourage management to adopt these types of system and processes because it helps ingrain some power in the hands of HR. The Human Resources team controls the performance review calendar, process, and the ability of managers to complete it. They can also install entire IT systems devoted to performance management and make it harder for companies to change once the process is embedded at the company.

We’ve seen many small companies adopt different processes to manage performance and completely dump the performance review process. Provide us feedback below if your company has dropped performance reviews.